Moody’s Ratings has stripped the United States government of its top credit rating, citing successive governments’ failure to stop a rising tide of debt, a surprise move that could complicate President Donald Trump’s efforts to cut taxes and send ripples through global markets.
On Friday, Moody’s lowered the rating from a gold-standard Aaa to Aa1. “Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs,” it said as it changed its outlook on the US to “stable” from “negative”.
Lol, I remember when my parents had to explain what this meant when it happened in 2009 or so. Now it’s happening again. Fun times ahead in the US.
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This is something that will probably be lost in the churn of the news cycle because most people don’t understand it, but it’s actually really bad for the US government. The reason this country has been able to get by with such a large debt until now was that the interest was kept low by the fact that lending money to the US was seen as very safe. A change in that status quo could bring the whole house of cards crashing down with calamitous results.
Greece for reference
Yeah Greece has a different standing and is still nor revovered from the financial crisis 10 years ago, where downgrades in credit rating also contributed
If you haven’t already, consider rebalancing your retirement accounts to invest in international funds. You may not be able to get international bonds but you can divest in federal bonds and instead support local/state ones. If your 401k doesn’t, consider talking to your HR department to see if you can get funds added.
Investing outside of the US market is financially and morally sound advice.
This also might be the optimal strategy anyway, a 33% domestic 66% international allocation. There was recently a paper on this topic, here’s a video covering it: https://youtu.be/-nPon8Ad_Ug
